US Gross National Debt Spikes by $640 billion in 8 Weeks

But the debt-ceiling charade is back.

The debt ceiling charade being played out every few years in Congress makes the entire world shake its collective head and pray that Congress will for the umpteenth time raise the dang thing or at least “suspend” it. The other option is a US default, the global consequences of which are too ugly to imagine, even for Congress.

In its infinite wisdom, Congress didn’t raise the debt ceiling in September; it only suspended it through December 8, after which the horse-trading will start all over again. But Congress is busy listening to lobbyists about the tax cuts – who gets them and who pays for them – and the debt ceiling isn’t even on the back burner. So here we go again.

But this charade has some peculiar effects, beyond its entertainment value: For months on end, it covers up the true extent of US government debt, and its continued surge. Then suddenly, the floodgates open.

Over just these six years, the debt has ballooned by $5.7 trillion, or 39%, from $14.8 trillion to $20.5 trillion. In the chart below, note the last three debt-ceiling fights, the long flat lines in 2013, 2015, and 2017, followed each time by an enormous spike when the debt ceiling was lifted or suspended, and when the “extraordinary measures” with which the Treasury keeps the government afloat were reversed.

The current post-debt-ceiling spike has reached $640 billion and continues to surge:

The last three debt ceiling spikes:

On October 17, 2013, the day after the debt ceiling was raised, gross national debt jumped $328 billion and then continued to surge. By November 25, it had jumped by $464 billion to $17.2 billion

On November 2, 2015, the day after the debt ceiling was raised, gross national debt jumped $340 billion and then continued to surge. By the end of November, it had spiked by $650 billion to $18.8 billion.

On September 8, 2017, the day after the debt ceiling was “suspended,” gross national debt jumped by $329 billion, and by now has spiked by $640 billion to $20.5 trillion. This spike is somewhat lower than my estimate on August 21 of an $800-billion spike, but it’s not through spiking yet either.

Those flat lines in the chart normally appear only once every few years when the debt hits whatever amount Congress put in place as the debt ceiling at the end of the last debt-ceiling fight. But this time, it’s different. As it stands, a new flat line will commence on December 8.

The Treasury Department has to borrow to pay for expenditures that the US Congress mandates the government to spend. But with the debt ceiling, Congress says, yes you must spend this money, but if you don’t bring in enough tax revenues – “ha-ha,” they laugh during tax-cut time – you cannot borrow the difference. You just might have to default.

As absurd as the concept of a debt ceiling may seem, Congress is unlikely to do away with it. At the same time, it has always and will always compromise, if at the very last moment, to avoid a default. There will be no default. Lawmakers are political animals. But they’re not stupid.

If Congress fails to increase or further suspend the debt limit by December 8, Treasury, as it has in the past, can take certain extraordinary measures to continue to finance the government on a temporary basis.

Extraordinary measures will allow the government to continue to meet its obligations through January 2018. It is currently too early to provide a more precise forecast as to how long the extraordinary measures will last.

So the preliminary out-of-money date is January 31. Congress knows that this out-of-money date can be pushed out, and with a good dose of well-honed Congressional brinkmanship, the flat line in the chart might extend into February or March. It will then be followed by another spike. The trend line of debt growth out the wazoo will remain intact. And if the tax cuts pass, the trend line will get even steeper – until it hits the next debt ceiling.

You wonder why the Republicans are pushing for their tax cuts early enough for the people to actually find out what they are paying, and how the idea that they are “revenue neutral” is a complete scam, before they go to the polls in November 2018. The only thing they have going for them is that the Republican cost-cutting measures will cut deep but probably with some delay. I guess ideology and greed trumps politics in this instance.

interesting

Nov 4, 2017 at 5:41 pm

“Republican cost-cutting measures will cut deep”

give me a freaking break, nobody in congress cuts anything. They may cut here and then raise there. It’s all just a smoke screen. there is not one person in congress that gives a shit about this stuff.

James Levy

Nov 4, 2017 at 6:34 pm

They are going to cut funding for birth control and prenatal care. They are going to cut funding for science and education. They are going to cut money for parks, environmental cleanup, health care subsidies, and housing. They are going to cut money to the CDC and OSHA. The results will not be pretty for a very large number of people.

van_down_by_river

Nov 4, 2017 at 7:12 pm

.01% spending cuts swamped by a tsunami of spending increases for the military, corporate subsidies and entitlements with a dose of revenue cutting “tax reform”.

Woohoo. we are saved!

Don’t worry, I’m told inflation will pay for everything, just don’t own any currency and you won’t get stuck paying for the new military build-up.

interesting

Nov 4, 2017 at 8:51 pm

wake me up when they actually do it AND for every $1 cut they will add $2 in pork, i’ll betcha.

oh and all that you mention in that list does not impact me one bit…..not even a little.

reminder: 60% of every dollar I earn goes to somebody else.

Anon1970

Nov 5, 2017 at 2:49 pm

So we will have more unwanted babies to feed and later on we will have to build more jails and prisons for all of the unwanted babies who eventually left school with the equivalent of a grade two or grade three education, if that.

alex in san jose AKA digital Detroit

Nov 5, 2017 at 4:51 pm

Yep they’re planning to cut winter heating programs for the elderly and poor, money for the EPA, all kinds of things. They want to cut availability of birth control to zero and abortions to zero. And they certainly want to tax the little guy like me – I recently got a raise that will bring me up to the lofty income of about $15k a year, and I expect my taxes will go from about $2000 a year to about $3000.

This situation is why I have decided not to start a business and have concluded that the best thing I can do is gain a black-market skill; something where at least most of the income can be off the books. I was really excited about the prospect of starting a real business that makes a real product, but I’d be very stupid to do so and I suspect I’m not the only person to come to this conclusion.

If I were still in my 20’s I’d head to Europe. The US is a sinking ship.

Mike

Nov 5, 2017 at 6:50 pm

Amen. Unfortunately, as a former Republican, I am amazed at how irresponsible and corrupt the current Republican congress has become. They seem to only care about keeping the ship of state afloat just long enough to grab their share of the goodies and to heck with our country later.
Right now, if passed, the crazy Republican tax cuts will explode the budget deficit. They are the most irresponsible actions that any congress in recent memory has even considered.
They seem to think that all foreigners are wedded to the U.S. dollar, so we will always be able to borrow and spend without limitation. The only reason that foreigners have accepted the U.S. dollar is its “stability” and its certainty of collection. The bad conditions in other countries that may not continue also helped.

As to “stability,” which means that it retains value, any massive increase in debt may ultimately result in a decrease in the value of the U.S. dollar. As to certainty of collection, that only applies if there is rule of law and a responsible government.

Rule of law is eroding. Court are increasingly ignoring the written laws and acting in favor of their cronies or for political reasons. At some point, even without the tax cuts, if the interest rates increase truly massive cuts will have to be enacted, because the payments on the current U.S. debt (counting undisclosed/concealed liabilities) already take up much of the U.S. revenue and with baby boomers retiring social security and other expenses will balloon.

Foreign countries will trust the U.S. dollar less and less as they realize that it may have a problem meeting its current debt payments, if new, and greater loans to it are not made by them. Political courts will cause more distrust. For example, Saudia Arabian funds are being sought based on politically motivated laws due to the actions of individual Saudi Arabians.

That is like seeking to charge Columbia for the costs of defending against the actions of Columbian drug dealers. Yes, corrupt members of their government may be behind the violence/attacks. However, if we break that alliance, as has been happening, there will be fewer and fewer countries holding U.S. dollars, when other currencies are more stable and bear less risks.

In other word, countries like Saudi Arabia, whatever their negative qualities, will want to lend less to the U.S. and invest less in the U.S., if they believe that their money is at risk here. Our current government acts as if it is the world’s government.

That is a mistake: Europe and China are each probably stronger than the U.S. now: they manipulate their currencies and their economies, but if that stopped, they would probably have stronger economies. E.g., our movie industry would not make great profits if its products were discouraged in foreign countries.

It is only the instability in other countries, like Mr. Richter mentioned as to Italy, that has kept the U.S. dollar as a reserve currency. Without that status, which is a matter of perception not a legal certainty, and can change in one month, we will have a huge problem meeting our current budget obligations in the next decade.

That is why the Republican congress is so irresponsible. Taxes should be getting raised on the 11% of Americans that own 76% of the wealth of America, not largely eliminated.

When the U.S. budget deficit and the U.S. dollar are in dire straights, Republicans are choosing to loot the treasury to give their rich cronies the best goodies: tax cuts, while our government faces an enormous crisis in this coming decade. Meanwhile, the baby boomers are retiring, government expeditures are increasing, government revenues are declining, the IRS (which could collect more funds if it were funded better) has had its funding cut, and other events have occured which will explode the U.S. budget deficit– even without the proposed, utterly IRRESPONSIBLE, Republican tax cuts.

The Republican party used to be the party of responsible fiscal conservatism. Reagan cut taxes, but closed many loopholes that benefitted the rich.

Current, corrupt Republican seem to be targeting the middle class with most of their changes. The proposed tax cuts are mostly going to the richest Americans.

Now, Republicans have the party that behaves like a drunken sailor that has spent years on a ship, when he finally is on leave in a whorehouse. Fasten your seatbelts. As the ancient Chinese used to say, we will be living in “interesting times” with corrupt fools like the current Republicans in charge.

The “tea party” Republicans are revealed by these tax cuts as hypocritical liars. They will enact them and may cause our government to collapse financially in the next decade.

Petunia

Nov 6, 2017 at 8:37 am

The problem with your rant is that the other side offers no relief from any of the problems you outline. As a former democrat, my disgust with the left is extreme. They only care about having the right “message”, which they use to sucker the voters to vote for them, but they never deliver on the “message”, ever.

BTW, the new tax plan is ok with me. I land up even to a little ahead, which is more than I would have gotten from the left.

Curiously Strong

Nov 6, 2017 at 9:47 am

A couple of data points…

There’s an optics challenge with any meaningful tax cut in this environment. When the bottom 41% of potential tax payers (50% according to some evidence) pay no net taxes, and the next 40% pay less than 20% of tax revenue, then any tax cuts will inherently look like they’re mostly benefiting the wealthy.

I’m a Canadian living in the US (10 years), and have seen my taxes increase measurably in the past 4 – 6 years, with my wages being stagnant in that period, but we’re still nowhere near what Canadians pay! I pay a lot in taxes, but my disposable income is still significantly higher here than it would be in Canada (and yes, I’m including my healthcare costs). I also observe that my European colleagues are ALL taxed as – or more than – my Canadian family/friends/colleagues.

This is a complex issue, and made much more so by our corrupt politicians. On both sides of the aisle. Our financial trajectory will not change without a major societal and market reset. One that allows a true, price-seeking market, and where politicians are held accountable for their actions. Am holding my breath…

Mike R.

Nov 4, 2017 at 4:52 pm

America the entitled. We bought into Reagan’s theme that god has a special place for this country. It will be a slow grind down and then something will happen very, very quickly. Could be next year. Could be 10 years from now. Not sure. But as long as this kind of denial continues, it will happen.

“Follow the Money and You Will Find The Answer” (new national motto replacing “In god We Trust”)

“It’s tough being a cynic these days. It’s so much work to keep up!
––Lily Tomlin

Mike

Nov 5, 2017 at 6:54 pm

Amen.

Mike

Nov 7, 2017 at 6:13 pm

Amen. However, I suspect that it will be sooner and like a sinking ship. It will be fine, then it will be sunk suddenly and with little time for preparations.

The U.S. dollar reserve status, is not written into the laws of the world, it is just a happenstance that results from a confluence of events and habits of world merchants, etc.

I am a former Republican. I still would call myself a moderate. Most people of the past would call me a conservative: accounting finance background and a lawyer that represented major companies.

I think that communism and many such theories are like belief in Peter Pan or Superman. They are funny and amusing to watch, but they are unrealistic.

However, the current Republicans are definitely not “conservative” or even responsible leaders. There is something grieviously wrong with our leaders: the current president and Republican congress.

They are no longer looking out for our country. They are looking out for themselves and their cronies. The commenters on this post may wonder if their own comments do not reflect this desire for personal benefit, over a benefit to our country.

As a lawyer, the Republican’s changes will benefit me. I worry about my child and the America that she will live in years from now. She will be alright, because I will work hard and use all of my extensive financial training (USC degree in accounting-finance) and US Hastings legal training training to protect her and save for her.

However, it will be a cruel, unpleasant, much more different America that she will see all of her life. I am not talking about global warming, which will make Mar O Lago into an island or part of some reef…

I am talking about an America where the rich, who were my clients for most of my life and are not without their positive qualities, have too much control and the rest of the population, with whom I identify, even though I could write them off, as I did for many years, to profit from a huge salary, will live lives that will amount to a type of slavery, at best.

That is not an America that I want to see. I think that is the America that we will all live in, because too many are sitting quietly by, watching their big screen TVs and driving their BMWs (of which I am guilty too) and letting it happen.

curious cat

Nov 4, 2017 at 5:08 pm

Better to be lucky than to be smart!

Bobber

Nov 4, 2017 at 5:33 pm

Every quarter point increase in the interest rate adds $50B to the deficit (every year going forward).

The long end of the yield curve will have to go up even faster to bring the yield spread to normal levels. Deficits will be accelerating higher.

And now we have fools pushing for tax cuts to add another $1.5T debt – as if the wealth gap weren’t large enough already.

Clearly, leaders care only about themselves these days. Dog eat dog. Even the president doesn’t care about the long term health of the country. We need real leaders.

Mary

Nov 5, 2017 at 6:45 pm

The kind of leader America needs is one who can tell them with brave face that Americans have been living way hey their means for too long. They show learn to live how most of the globe lives instead of feeling entitled to first world privileges, retirement guarantee or a suburb lifestyle. That those who cannot become millionaires, should stop having kids and save for retirement instead. Those who cannot get a well paying job should live in some shared dormitory instead of getting a nice house all for themselves at a suburb. Look at how most chime, Indonesian, Brazilian lives. What entitles Americans to live a 100btikes more expensing lifestyle while burdening the next Gene with national debt?
Is there a leader who can remind us that? Would you vote for him?

Smingles

Nov 6, 2017 at 12:24 pm

“In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns.”

– Jimmy Carter’s “Crisis of Confidence” speech to the American people

Do note that he suffered significant backlash for that speech. And that was forty years ago; every bad trait you could attribute to Americans has probably only gotten worse since then.

Carter told the truth that Americas supposedly heard in church. They threw a giant tantrum and elected Reagan. We’ve had a Reagan ever since.

91B20 1stCav (AUS)

Nov 8, 2017 at 1:59 pm

Thank you, Smingles-you beat me to the history lesson. A better day to us all.

JB

Nov 4, 2017 at 6:26 pm

And the feds started their unwind process . So who is/will buy this new issuance debt ? Maybe it will be absorbed with ECB/BOJ liquidity. Looks like big government is here to stay . Maybe it is the only way to goose GDP .

Nick Kelly

Nov 4, 2017 at 6:56 pm

Does anyone feel like picking apart this idea:

You want to return money to the middle class? Just do it. E-deposit say $500 in every bank personal bank account with less than 10, 000 in it. One deposit per person.

No accounting, no muss no fuss. And because it’s not permanent, or even complex, you can assess the impact and then repeat or not.

One prob (apart from lunacy) is what about those who don’t have account? Homeless etc.

Not sure: vouchers?

Petunia

Nov 4, 2017 at 8:22 pm

The War on Poverty was the biggest scam ever perpetuated by the left. It was really a permanent jobs program for the professional class.

I do agree that if you want to help people just give them the money. If Amazon can find you I’m sure the IRS/Treasury can too.

d

Nov 5, 2017 at 2:47 am

“I do agree that if you want to help people just give them the money.”

True as even if they simply blow it.

It will still spend time running round in the bottom of the economy before some of it naturally migrates back up through the economy increasing Economic activity along the way.

Petunia

Nov 5, 2017 at 1:34 pm

Giving money to the poor is more stimulative to the economy than giving it to the rich. The poor will spend it all, while the rich will save it all. Trickle down economics has proved it.

Lune

Nov 4, 2017 at 8:50 pm

The govt doesn’t do this anywhere due to opposition from private banks. Obama faced huge resistance to direct federal student loans. If the govt is assuming the risk anyway by guaranteeing student loans via Sallie Mae, why not lend directly rather than forcing students to pay additional interest to a private bank?

Similarly, think of conforming mortgages: the banks get free money from the Fed at 0%, lend it to you for 4%, then sells the loan to Fannie Mae which provides a govt guarantee, and then sells it back to the Fed for a profit. Why can’t the Fed simply loan the money directly and pay banks a nominal fee for servicing the loan? Because then where would the banks make their risk free 4% (for which they don’t even have to come up with the original capital)?

To make it even easier. Imagine someone gives you $100, asks you to lend it to the guy across the street, and if you do that, he’ll buy that loan back for $110 (since it now carries a higher interest rate). The guy across the street pays $120 in total, the Fed “makes” $10 (even though it could have made $20), and you walk away with $10 bucks without assuming any risk, and without even having to pony up the initial $100. To make this example complete, imagine the first guy got his $100 by extracting it from the second guy’s pockets to begin with, and that the first guy’s boss is your nephew who’s forever grateful you helped him get his job, and is hoping you’ll hire him again when he’s done.

Do you really think the banks want to be cut out of this sweet deal? Would you?
There’s a reason not even “helicopter Ben” Bernanke had the guys to bail out people directly…

Dan Romig

Nov 5, 2017 at 6:44 am

Sallie Mae will be happy to lend students money using the ‘Smart Option Student Loan’ to “bridge the funding gap between federal loans and the cost of your education. You can get competitive variable interest rates from 3.25% APR to 10.22% APR.”

A rentier sector in steroids is the main problem you are facing, and no matter what amount of $ you throw into the bank accounts of the average citizen because it will not stay there for long.

Smingles

Nov 6, 2017 at 12:30 pm

“A rentier sector in steroids is the main problem you are facing, and no matter what amount of $ you throw into the bank accounts of the average citizen because it will not stay there for long.”

Yup. We’re returning to an aristocratic / feudal hybrid model.

About half of the country mindlessly supports it because they’re under the mistaken notion that they will be a part of the ruling class at some point in the future. Sad.

Kent

Nov 5, 2017 at 8:06 am

It destroys the core American myth that all wealth can only be created by the private sector. So it is purely political. And I believe both Bush I and Bush II did this during their administrations.

Lune

Nov 4, 2017 at 8:23 pm

Not mentioned is the costs of each debt limit debate. The uncertainty during that time leads to investors demanding increased interest rates, leading to higher borrowing costs as treasury focuses on just keeping the lights on rather than the most efficient ways to manage the debt.

This last debt fight (in Aug /Sept) cost around $2.5bil in increased interest. IOW each stupid kabuki play that congress puts on in the name of “fighting for the taxpayer” costs that taxpayer billions extra for no benefit. So much for fiscal conservatism.

Petunia

Nov 4, 2017 at 8:28 pm

Congress doesn’t need a debt limit. Constitutionally they can spend whatever they want. Vote them all out while you still can.

Kent

Nov 5, 2017 at 8:12 am

The requirement for a debt limit increase was in the original acts that created the Federal Reserve, IIRC. what’s left unstated is what happens if they don’t increase the debt limit. The President is still required constitutionally to execute the laws Congress has enacted. Does the President get to unilaterally decide what to cut if Congrss can’t?

Petunia

Nov 5, 2017 at 8:31 am

By vetoing the spending bill the president exerts his authority to restrict unlimited spending. That’s the whole idea of separate powers.

JM Keynes

Nov 4, 2017 at 9:50 pm

– Someone who follows the developments closely in Washington DC said the following:
– A spending cut does NOT mean that spending is reduced but that the increase of spending slows down. E.g. instead of an increase in spending of say 5% then the increase will only be say 2%.
– If Congress is talking about “tax reform” then hold onto your wallet, because the total amount of spending will continue to increase. Then the changes will be so large that only the Treasury Department will know what the net impact will be for the entire country.

– The spike in the debt means that the Treasury was holding off on issuing more T-bonds for a while.
– The infamous “debt ceiling” allows Congress to keep posturing with socalled “tax reforms”, and pandering to the political base. That’s why this thing will never die. For the rest is the entire “debt ceiling” debate “kabuki”, a “dog and pony show”.

Rates

Nov 4, 2017 at 11:52 pm

You want this shit to be contained? Give up the reserve currency status. Things will get contained in a hurry

Frederick

Nov 5, 2017 at 12:46 am

Which is EXACTLY where we are headed Perhaps Not tomorrow or next month of course

Robert T

Nov 5, 2017 at 10:52 am

The reserve currency status is like The Monroe Doctrine, sustainable only by force. Everything that Jefferson, and Jackson warned about an overpowerful central government and a central bank has come true: a national debt grown so massive that a substantial rise in rates threatens economic disaster- but not for the banks that own the Fed- they get funds, to the extent that the national debt can be expanded, virtually interest-free. That is why former Treasury. Sec. Jack Lew, and current Sec. Mnuchin want the debt limit eliminated, in other words no input by your elected representatives in the matter. At the height of the inflation caused by LBJ’s Vietnam War and Great Society (compare that to a dozen undeclared wars today), Paul Volker raised interest rates to double digits- savers were getting 10%, compared to 0.01% today. What would it take for one of the Chinese banks operating in the U.S. today (they are also primary dealers in Treasury debt) to offer, say 1-2% to savers here to cause a tsunami of money flowing out of U.S. banks?

Nick Kelly

Nov 5, 2017 at 2:52 pm

This almost happened in 1978- 81.

US tourists everywhere were asked if they could pay in other currencies.
In Italy some were asked to pay in lira.
The US issued bonds denominated in Swiss francs and D-Marks.

It took Paul Volcker driving the Fed rate over 20 % and a painful recession to quell inflation and restore confidence.

Some have wondered about the possibility of the euro collapsing and everyone returning to national currencies. (The advocates of this for Greece and Italy may wish to check on local opinion of this move)

If this was to happen and Germany returned to the D-Mark, the US dollar
instantly becomes the second- tier currency. It would still be the cleanest dirty shirt, but now there would be a clean shirt.

Of course, German industry would howl at the strength of the mark, but they’ve song that song before and they survived.

Maximus Minimus

Nov 5, 2017 at 7:35 pm

Right. If Switzerland can live with it’s safe haven currency, so too could Germany. Maybe they will need to adopt some tricks from Japan, like currency manipulation. The next crisis will sort out the status of the Euro.

I remember this as a young child (between 8 and 11). My mother gave me the task of calling banks and S&Ls every three months to check rates, and she’d move accounts and CDs around.

She had great timing. I remember her moving CDs to banks that were offering 18% for five years before rates started to come down.

Nick Kelly

Nov 7, 2017 at 10:16 pm

I bought my first place (in Canada) in 1980. Mortgage was 14 %. Got a one year term cuz rates could only come down.
Year later they’re 21.
Survived, barely.

Raymond C Rogers

Nov 5, 2017 at 12:46 am

Hey, what is with all the scaremongering?

The government can promise plenty more. It is almost Christmas you know. With all this debt, let the government spend even more. We can do free college, totally free healthcare, and so much more. Cmon people, think of all those struggling people who need electric vehicle subsudies. Oh and once we give free everthing to the big-wig corporations, citizens and invaders alike, we can print some more.

Jeff fandell

Nov 5, 2017 at 12:10 pm

Without endless and vast foreign wars we could easily provide each and every legal american education, healthcare, housing , food and transportation…all free. The trillions spent in Iraq alone would be more than enough to meet every americans basic needs..and then some.

Just too many hands in the deep war machine pockets,,,not to mention the huge influence of the pharma, education and agriculture monopolies. Trump has and will accomplish nothing of significance. Status quo is way to strong to minimize or either party and their lobbies.

I think very much like japan…this game can be extended for many years….it already has. Defying gravity works until it doesnt….then the result is very ugly.

Raymond C Rogers

Nov 5, 2017 at 8:46 pm

I don’t think you habe taken a serious look at the numbers and debt. You are correct to say that Iraq cost trillions. But these massive- let me say that one more time- MASSIVE entitlement programs are not fiscally sustainable for any considerable period of time.

As much as people point at what Bush spent on war, people ignore the domestic spending that was a greater slice of the pie. And last time I checked, most debt under Obama had nothing to do with the military.

It is not the federal government’s job to provide personal needs. It’s job is to garuntee rights, and cover the most basic functions of society. That us the basis of our entire system. When it does these things it doesn’t destroy the very backbone of the country- the monetary and fiscal systems that allow the country to function in the first place.

The 800lb gorilla in the room is the entitlements folks. Sorry I didn’t make this the way it is-it just is. It’s ironic that while we don’t have the funds to cover existing programs, people are in favor of creating more.

d

Nov 5, 2017 at 10:46 pm

“The 800lb gorilla in the room is the entitlements folks.”

And The 10,000 Lb one, is State and government employees over-paid, to shuffle papers round in a circle for life. Creating “Employment” for their children sisters brothers and buddies.

Smingles

Nov 6, 2017 at 1:29 pm

“I don’t think you habe taken a serious look at the numbers and debt. You are correct to say that Iraq cost trillions. But these massive- let me say that one more time- MASSIVE entitlement programs are not fiscally sustainable for any considerable period of time.”

Not true. Sustainability is a math problem. It’s solvable.

“It is not the federal government’s job to provide personal needs. It’s job is to garuntee rights, and cover the most basic functions of society.”

Why is education considered a basic function of society but healthcare is not?

Most of the civilized world considers basic healthcare to be a fundamental human right in 2017.

Raymond C Rogers

Nov 6, 2017 at 6:57 pm

I agree. There are plenty of worthless government positions that need to be cut.

Yes, debt is a math problem. It’s a spending problem. Problem is most people want to solve it by confiscating wages and private property.

Healthcare is not a right. Nor is education. We do education because it is deemed worthwhile. The point is when you start arbitrarily naming rights, there is no end. Healthcare was never enumerated as a right. Private property, however, is a right. That’s the social compact. Other countries have different social contracts, but that is not the social contract we have with the Declaration, the Constitution, and the Bill of Rights.

jest

Nov 5, 2017 at 1:30 am

Isn’t there a point where there’s no return? where the debt is so Big that it can’t ever be removed? at what point is that? at what interest rate would make it happen? It can’t be that difficult to figure out mathematically!
The point where the debt is out of control/ can never go down but continuously rises. Given limited sources of Revenue ..via individual and corporate tax revenues that should be able to be calculated. And the tax breaks isn’t that just robbing Peter to pay Paul? I mean you give tax breaks but the government will get less revenue as a result! so what is really accomplished? Seems like selling the airlines to buy the oils or sell the nasdaq to buy the spx.
When i see that National Debt chart i can’t believe my eyes and how it can’t be the top priority.

d

Nov 5, 2017 at 2:59 am

American State debt, is not a problem, as long as:

1 Americans/American corps own most of it.

2 The US Government/State can still make the VIG. When calculated against its income

3 Compared to everybody else, the debt % to GDP ratio, is reasonable.

Break one of those three then you have a problem.

Today the US T’S are still the most liquid documents out there demand is HUGE.

US$ demand is so huge, CCP China, can sell dollar denominated debt, by the trillion.

Personal any bond issue by CCP china, is not worth the paper it is printed on, as there is a huge looming default risk in china. The question is, when.

MD

Nov 5, 2017 at 4:49 am

This the reality of the globalised word – the post-war period of ever-increasing prosperity is over for the countries which have implemented the neoliberal model, and gleefully allowed their wealth-creating mass-manufacturing base to be hollowed out. Those countries – specifically the USA and UK – are now well and truly mired into their decadence decline phase, with no way of growing their economies without piling up debt.

That’s neoliberalism! In a nutshell it’s a coup d’etat by the financial speculator, whose lobbyists misinformed politicians that manufacturing is no longer necessary, and promised them great riches if they played the game.

Meanwhile, Germany has a booming auto industry paying their – unionized – line workers $25 per hour and exporting their cars to the nations which have benefited from the deindustrialisation of once-great manufacturing powers, which now have warehouses holding imported goods where factories once stood.

Drango

Nov 5, 2017 at 8:19 am

At least the voters in Great Britain know that there is something wrong with their economy. Kicking out the tens of thousands of bankers who have hollowed out their economy is a good start. Unfortunately, Americans are still under the delusion that the financial industry is a productive part of the economy, and that the Fed knows what is good for the economy, and not just the banks.

Bobber

Nov 5, 2017 at 8:26 am

This problem you note would have been easily fixed by the border tax that Trump was supposed to implement. You know, the tax that he campaigned on daily. Instead, he comes up with income tax breaks for the wealthy to further Average Joe’s decline. The current tax plan is garbage and does nothing to improve the middle class.

They have the balls to tout trickle down theory as Average Joe’s tax cut. After all we’ve been through.

Anon1970

Nov 5, 2017 at 3:02 pm

The border tax is just another word for tariffs. As a signatory to various trade treaties, the US cannot just raise tariffs on its own without inviting challenges from other countries at the World Trade Organization and then tariff increases and restrictions imposed on US goods and services by other countries. I suppose the average American knows nothing about the Smoot-Hawley Tariffs imposed by Congress in 1930. That beggar thy neighbor policy led to massive unemployment in Germany and the rise of the Nazi Party in Germany.

Raymond C Rogers

Nov 5, 2017 at 8:55 pm

How does the wealthy benefit from a tax plan that keeps the top rate at 39.6 benefit the rich?

Most rich people pay an enormous amount of taxes. There are your Warren Buffets and other hypocrites who employ every trick in the book to avoid this, but these do not make up the majority of what you and I would call wealthy.

Kent

Nov 5, 2017 at 8:20 am

The federal government has an expenditure problem. The inflection point comes when spending is so high that every American who wants a job has one AND can demand ever higher pay due to massive labor shortages and the rebirth of unions. Inflation will begin to soar and companies will find it ever more difficult to be profitable. But we are a long way from that. As Dick Cheney said “the debt doesn’t matter.” That’s because the government doesn’t pay the debt out of taxes. Expenditures matter.

Nan McConnochie

Nov 5, 2017 at 2:48 am

IMF is the Boogie in the back room for America’s debt. If and when the ledger financial transactions is implemented (January?) then the reserve currency will be a goner. And when ultimately the stock market falls, the job market is impacted the latest shiny object won’t be the latest tweet.

2) you want the facilities of a first world nation – but aren’t willing to pay the tax to build and maintain them.

Meanwhile, whilst the libertarians call for lower taxes (without ever explaining who will then pay for the potholes to be fixed…) the Chinese Stalinists – who don’t have to borrow their money into existence as debt – continue to take over the world with their old-fashioned ‘industrial planning’ (urgh!) that we no longer do.

Seems like it wasn’t ‘the end of history’ 25 years ago after all!

Drango

Nov 5, 2017 at 10:23 am

China isnt exempt from the effects of debt. It’s form of government allows it to put off those effects for a while, but when they finally hit, the implosion will be felt around the world.

d

Nov 5, 2017 at 6:46 pm

“China isnt exempt from the effects of debt”

Throuout know history china is the global poster child of civil wars.

At teh root of the vast majority of those wars, since the inception of the use of printed money by china has been EXCESSIVE MONEY PRINTING by the state.

This time will be no different.

Raymond C Rogers

Nov 5, 2017 at 9:04 pm

Individuals are not your personal slaves to tax at whatever whim. We have this concept in the United States called private property. Private property is property owned by the individual, not the state. The “pursuit of happiness” was lifted from Locke’s “propery”. The founders wanted the clause to entail more than property, so they went with “pursuit of hapiness” that entails more than private property. This clause in no way negates the founding belief that private property is a Right.

Lindsay Berge

Nov 6, 2017 at 4:58 am

The collapse of empires often seems to occur when the elites refuse to pay the taxes required to pay for the machinery of state. I hear endless criticism of Greece for not collecting taxes from people who seem unwilling to pay taxes themselves. I do not think this will end well. Private property is an abstract concept without a social context to enforce it.
I also find it hard to understand how someone can call themselves a citizen, let alone a patriot, who is not prepared to contribute to the general welfare of their country according to their means. “And so, my fellow Americans: Ask not what your country can do for you — ask what you can do for your country.”

BobbyBoy

Nov 5, 2017 at 8:36 am

I suppose the debt would accelerate when the US hits the next recession. The green arrow would angle more up similar to the angle between 2011-2013.

Wendy

Nov 5, 2017 at 8:45 am

So is this debt going to be inflationary, or deflationary? Why?

If inflationary, why is the dollar strong, and commodities lackluster?

Steve

Nov 5, 2017 at 9:31 am

The way I see it the debt has been on a constant upward spiral since Reagan slashed taxes for the rich from 70% to 28%. The debt tripled under his Presidency and has been in a consistent unbroken movement ever since with each successive President adding more.

Before Reagan the debt was diminishing on a consistent basis since WW2. Reagan reignited the National Debt while instilling the ‘tax is a dirty word’ meme which rules America. This has ensured that nothing will be done about it, ever….until default.

Raymond C Rogers

Nov 5, 2017 at 9:17 pm

Did wolf go to a socialist or communist convention handing out buisiness cards?
What is the draw with people who believe the government has the right to confiscate everything you work for?

All the answers on here are confiscate, confiscate, confiscate. Didn’t your parents ever teach you people about stealing or envy? Yeah I know- many rich people steal and rig the system, but most of them did not. But most millionaires in this country are first generation. They either worked harder, picked a better field of work, or came up with a better idea than you did. I’m nowhere near being a millionare, but I don’t begrudge the majority that were successful because they did one of those things.

The debt was manageable before 2000. It was certainly manage under Reagan and Clinton, so let’s not play the tired game of pick a Republican president to blame. The real shit with regard to reckless spending came this century.

Roger

Nov 6, 2017 at 8:25 am

I remember Reagan and the GOP in 1980 “shocked” about Carter’s deficits, which were ~$50B. Both parties have been fiscally irresponsible. Right now, we either need to cut the size of the war budget (which I think would be beneficial to everyone) or actually raise taxes.

I say that as a retired DoD budget analyst and contract auditor. Even during the Carter administration, we had money to waste. On my little Army post near Chicago (Fort Sheridan), we were refurbishing general officer quarters right and left at fiscal year end just to use up the money.

Shane From Melbourne

Nov 5, 2017 at 9:45 am

“On October 17, 2013, the day after the debt ceiling was raised, gross national debt jumped $328 billion and then continued to surge. By November 25, it had jumped by $464 billion to $17.2 billion
On November 2, 2015, the day after the debt ceiling was raised, gross national debt jumped $340 billion and then continued to surge. By the end of November, it had spiked by $650 billion to $18.8 billion.”

So why do Americans think their debt can just keep increasing until the end of times? Sooner or later things will fall of the cliff. Dollars will not be the “world currency” forever ya know?

Bobber

Nov 5, 2017 at 12:38 pm

The Euro, Yen, and RMB are just as bad, if not worse. Thus, there is no stable alternative currency.

Bitcoin is rising for good reason.

Gold should be rising too. I think gold and bitcoin will pop big once the Fed decides to end its quarter point increases. If they quit raising every two months, it will be a sign all traditional currencies are heading down a path of worthlessness.

d

Nov 5, 2017 at 6:53 pm

“Gold should be rising too.”

Everything says that gold is over priced by around $1000.00 per OZ based on the 20 multiple with silver. And the price of other metals.

Until the divergence between silver and gold, is resolved to the 20 multiple, gold is simply manipulated, out of reality. So physical gold, is untenable, to buy.

economicminor

Nov 5, 2017 at 2:09 pm

People like the idea that they get more and some how some one else pays for it.

Have you listened to the political rhetoric about taxes and debt? Those speaking convey an image about positive outcomes by using the most convoluted logic that even they can’t explain when asked. Yet they are positive.

Most listeners have no idea about the logic (which isn’t logical at all. What is presented as truths are far from any real facts). Yet people can tell that the speaker is presenting a positive outcome which is purported to benefit them in some way. And because there is no way to even analyze such gibberish it is much easier to go along to get an imaginary benefit rather than try and argue with crazy presented by a crowd of politicians and lobbyists.

The tipping point will be reached in a few years, due to demographics, baby boomers had fewer children, and each generation after that, so that wealth tends to funnel down to the current generation. There is the case of haves and have nots, those whose families never acquired any assets, or could not hold onto them. For them the credit squeeze will fall particularly hard. Government which is all debt and no collateral will continue monetary policy which negates the value of collateral, but at some point real collateral wins when the only people who need credit have no collateral. At present the debt monkeys are running up asset values, with the idea, like the housing bubble, that borrowers could have their home mortgage and leverage it too. The procession of less qualified less civil candidates proves that DC is heading toward a crisis, and a military coup may come about. I say good, all we need is a commander in chief, and probably not the one we have. The rest returns to the states, autonomous units. The Federal debt is an illusion, and will end up where all illusions finally end.

Wilbur58

Nov 5, 2017 at 11:59 am

Wolf,

Is it not true that most money created this days has debt attached to it? The one exception would be when bills and coins are minted, which I believe is only 2%-3% of the supply.

So then, doesn’t it stand to reason that when money creation goes through the roof as it has since the crash, that both private and public debt balloon as well?

No it means when credit collapses, that the money supply will collapse with it, causing another great depression during which money simply disappeared

James

Nov 5, 2017 at 12:09 pm

I attended a military transitioning program from the US Navy to the US Army and the base laundry room had one faucet that just leaked water for the five weeks I was there. Not just a drip-drip, but a huge blast of water coming out 24/7. I was laughing so hard that the govt just didn’t care about the water bill when the taxpayer is forking over the money.

Bobber

Nov 5, 2017 at 12:44 pm

Why didn’t you fix it? Didn’t it bother you?

James

Nov 5, 2017 at 4:14 pm

I notified the higher up people to no avail.

Frederick

Nov 5, 2017 at 2:36 pm

Pretty lame James

Nick Kelly

Nov 5, 2017 at 8:25 pm

If he’d touched it with a wrench he might have ended up in the brig.
And I suspect his critics don’t have much experience of the military.

d

Nov 5, 2017 at 8:26 pm

√

walter map

Nov 5, 2017 at 12:51 pm

How the Trump Administration Is Gutting the U.S.D.A., Endangering Families, Food, and Rural Communities Vanity Fair

Next year they’ll be complaining about the soaring deficits and will remind the general population that the (new and improved) War Effort requires sacrifice from everyone, so that will be the end of Social Security and Medicare. Profits should be excellent, if not transcendent.

Food riots and old people dying in the streets. And to think people actually vote for these things.

Ed

Nov 5, 2017 at 2:55 pm

It’s going to really suck when the interest rates go up.

The current plan is new debt just to cut taxes.

Personally, I can see the value of debt for schools or better transportation or some other benefit that pays society back . . . but new debt for estate and corporate tax cuts? The permanent changes in the tax code lean toward these cuts for the very wealthy and away from the middle class cuts, of course. But either way, it’s foolish.

Nick Kelly

Nov 5, 2017 at 8:07 pm

And don’t forget your new guy loaded his casinos with debt (Taj etc, ) until they collapsed but paid himself a fortune in fees, etc.
He did fine, they didn’t.

Question: how does an economy 20+ trillion in debt merit a tax cut?
Oh right, I forgot, the stimulus pays for itself and then some.

AKA: The Laughter curve.

Realist

Nov 5, 2017 at 3:32 pm

Retirees, pensions ……..

Gershon

Nov 5, 2017 at 3:57 pm

When the financial house of cards created by the Fed and our profligate politicians finally implodes, those holding precious metals, life’s essentials, and productive farmland are going to be the new one percent, at least until authorities expropriate their gold and provisions “for the greater good.”

Smingles

Nov 6, 2017 at 2:41 pm

What are precious metals good for in 2017? 99.9% of people in the developed world have never paid for or received payment in a precious metal. Think someone is going to sell you food for gold? Medicine? Or anything else that has practical value?

raxadian

Nov 5, 2017 at 8:43 pm

More debt, rate hikes and tax cuts, Oh my!

Yeah 2018 is gonna be horrible.

Gershon

Nov 5, 2017 at 8:50 pm

Yet all the ratings agencies still have their AAA ratings on the US. Just like they did for the toxic-waste MBS portfolios banks like JP Morgan and Goldman Sachs sold to “investors” back in 2007.

Standard & Poor’s downgraded the US credit rating from AAA to AA+ in 2011.

Gershon

Nov 6, 2017 at 12:06 am

Still way too high, under the circumstances.

Joseph

Nov 5, 2017 at 9:01 pm

What if the USA were a corporation?

GDP would be considered the gross profit, but what would the actual “net profit” of US GDP be??

Chris

Nov 6, 2017 at 9:56 am

The debt and the debt ceiling are irrelevant. The US can never pay the debt it has incurred. Neither can its European counterparts. The debt ceiling “debate” is all show. The end game involves a default, global financial meltdown and restructuring/reset of the global financial markets/fiat currency system and, of course, chaos.

A big bout of inflation will do the job. We already have asset price inflation. Consumer price inflation next? If you devalue the currency, the debt that is denominated in that currency is also devalued. But it’s not free: One guy’s debt is the other guy’s asset. Not to speak of wages … they’d have to rise with consumer price inflation, and that may not happen.